Who sets the criteria for an author to be included in the literary canon--that is, how is the literary canon formed?
I mean, how did that process evolve throughout the time? Are there any relevant eras/decades that mark the process? (Elizabethan, Victorian, the 1960s). Apart from female, middle-class and non-white writers who challenged the canon, can we say that the canon has been influenced by pop culture works such as King Solomon's Mines?
The term "canon" derives from the Greek. There was a fixed Alexandrine canon (2 epic poets, 3 tragic playwrights, etc.) , and later the growth of canonical New Testament texts (those which were to be read in Church). The term gradually became used to refer to a more organic system of "important" works by the 19th or early 20th century, but still retains a sense of the pedagogical, i.e. that canonical works are those that are taught. There is no canon for leisure reading or entertainment.
An interesting appropriation of the term occurs in fan communities which have very meticulous ways of differentiating "canon" from "fanon".
First, we have to understand that there is no official list of works or authors called “The Literary Canon”. To be sure, there are canons for religions, etc., but the word is used metaphorically, even deprecatingly, in the literary/scholastic world. It simply means those works that, because a professor long ago assigned a work or author to his/her classroom, those students who became professors assigned the same works, because they were familiar with them. Further, certain works are transparent examples of genres, periods, innovations in style, etc., and therefore are most often put on a syllabus or lectured on, exactly because they are good representatives. Examples: Joyce’s Ulysses is a book “in the canon” because it is modernism at its rawest. Camus' The Plague is "in the canon" because it is a good representative of the existentialist novel. Chaucer’s Canterbury Tales is “in the canon” because it not only is a good example of Middle Age literature, but also is a gateway to the history of the English Language. Robert Mannynge of Brunne’s Handlyng Synne is not “in the canon” because it is seldom taught or studied medieval work. We read Lord of the Flies and Animal Farm and Catcher in the Rye in highschool classes because they are accessible to teens, and could be considered “in the canon” in that respect. As for how these choices are made, look at the ubiquitous Norton’s Anthology, in all its variations and editions. A group of scholars at Cornell University compiled and edited these texts, giving “canon” status to dozens of authors and their major works. More perplexing are the omissions—no Lillian Hellman because Eugene O’Neill, no Galsworthy because Shaw, no Sherwood Anderson because John Steinbeck, etc. Certain works get “frozen” into the “canon” (Wycherley’s Country Wife rather than any of hundreds of plays by Richard Cumberland, etc.). So the basic answer to your question is: the “canon” is an unofficial record of works (and authors) that have been perpetuated through the inertia of academia and by the automatic preservation of “representative works.”